Opinion: One thing’s for certain in the EU debate – the end is nigh

Opinion: One thing’s for certain in the EU debate – the end is nigh

Higher priced holidays would be one of many ‘certainties’ in a post-EU Britain, says David Cameron. Thank goodness the end of the Brexit debate is in sight, says Ian Taylor

I doubt Britain will leave the EU following next month’s referendum. But it might if the claims by either side become any more facile.

To judge by recent days, Britain faces a future as some kind of Cuba, outside of all trade deals. Your job, your home, your holiday, your health care are on the line.

Thankfully, it will soon be over. The latest poll in the Brexit-supporting Daily Telegraph suggests a 13-point lead for the Remain campaign.

A poll of polls at the start of this week put the lead at seven points, although an ICM poll on May 20-22 had the two sides neck and neck. For those who haven’t made up their minds there was a barrage of doleful predictions.

Monday saw the Treasury forecast a year-long recession if we vote ‘leave’. Tuesday had Cameron predicting the average family would pay £230 more for a holiday.

The Institute of Fiscal Studies weighed in with a warning of two additional years of austerity in the event of Brexit. Well, tell that to Greece. In fact, tell it to us, because the Chancellor’s autumn statement in November made clear the government has no plans to end austerity.

As Conservative political commentator Tim Montgomerie told the GTMC conference last week: “The hardest cuts are still to come. We may think we’ve had enough of austerity, but there is an awful lot of pain to come.”

So vote Remain, leave, spoil your ballot or stay in bed, austerity is what you’ll get. Next up, no doubt, will be a blast from the G7 Summit.

The Treasury forecast sounded convincing. “Britain will be plunged into a year-long recession if it votes to leve the EU,” reported the Financial Times.

This prediction is based on a forecast last month, also by the Treasury, that a vote to leave would have a long-term dampening effect on the UK economy, reducing growth by a cumulative 6.2% by 2030.

The short-term ‘shock’ scenario published this week suggests a recession shallower than any in living memory based on the assumption that people accept the Treasury’s previous forecast and cut spending in the wake of a Brexit vote because they fear the forecast decline.

In other words, it is a self-fulfilling prophesy.

Helpfully, the Financial Times noted: “Officials have modelled these effects using vector autoregression techniques [which] have few theoretical foundations.”  That is a fancy way of saying they don’t know what they are doing.

Not one of the bodies which has forecast the dire consequences of a leave vote foresaw the consequences of the financial instruments and debt which triggered the crash of 2008, of course.

The Financial Times reflected further on the forecasts on Tuesday and concluded: “Are the methods convincing? No. “Politics required lost jobs, a recession and lower house prices and officials chose methods that delivered that outcome.”

No matter, the Treasury confidently asserted Brexit would cost 520,000-800,000 jobs, depress wages by 2.8%-4%, lower house prices by 10%-18% and drive down sterling by between 12% and 15%.

Interestingly, the edition of the Financial Times which reported this noted growing gloom among foreign investors in the UK in an annual survey by consultancy EY (formerly Ernst & Young).

“Brexit was far from the only issue,” it reported. “Investors also raised concerns about labour costs, airport and road capacity and the high cost of real estate.”

But if the Treasury stab in the dark were to prove correct, leaving the EU would address two of these concerns – ‘labour costs’ and high property prices.

It was the Treasury forecast of a 12%-15% fall in the value of the pound that led to the ‘£230 on your family holiday’ forecast by Cameron and endorsed by easyJet chief executive Caroline McCall, along with a warning that Brexit would put cheap flights at risk.

Clearly, if sterling falls as it may well, overseas holiday costs will rise (though Britain would become more attractive as a destination).

However, note that the pound has already fallen with no discernible impact on travel. Latest figures put outbound departures, forward bookings for summer, and inbound arrivals all up year on year.

But look at the argument another way. Has the EU led to cheaper holidays? Well, Greece, Spain, Portugal and Italy were all considerably cheaper for UK tourists in the days before the euro, as were Slovenia, Croatia and so on. So it could be claimed that the EU has hiked holiday prices.

What about the idea that leaving the EU would jeopardise air traffic rights and “end cheap flights”?

Cameron insisted this week: “If Britain leaves the single market, Britain may be forced out of the Open Skies regime and airfares and the cost of holidays will rise. That’s not speculation, that’s a certainty.”

EasyJet is a pan-European giant whose first base outside the UK in 1999 was Geneva, in Switzerland – a country outside the EU. Basing aircraft outside the EU didn’t seem to bother easyJet then or hinder its growth.

Indeed, the home base of Norwegian Air Shuttle, Europe’s fastest growing carrier by a country mile, is outside the EU. That does not prevent it making Gatwick its main base.

Ryanair’s Michael O’Leary echoed Cameron’s warning, insisting higher fares and holiday prices are “a certainty” and threatening to cut jobs in the UK.

Yet in February, the Ryanair boss who has previously dismissed the EC as “the evil empire”, told ITV News: “I don’t believe leaving the EU will cause airfares to rise.”

This more sober assessment mirrors that of Willie Walsh, head of British Airways parent IAG, who told the BBC in February: “We have undertaken a risk analysis.

Obviously there is uncertainty in the market. But should there be a vote [to leave], we don’t believe it will have a material impact on our business.” Of course, if Cameron is truly concerned about holiday prices he could axe Air Passenger Duty.

There may be good, sound arguments for remaining in the EU, but those we’ve heard this week are not.


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